IN THE REGION/Long Island; A Rare Niche: New Homes for Rent

By VALERIE COTSALAS

Published: September 4, 2005

WHEN James and Jeanette Greco set out with the help of classified advertisements to find homes for rent near Port Jefferson in Suffolk County, they quickly learned to spot the rentals on most streets even before they saw the house number. ''It's usually the worst house on the block,'' Mr. Greco said.

Two years ago, the Grecos sold their Port Jefferson Station home and were planning to move to Florida with their daughter. But by the time they closed on a house, their daughter had started her first year of high school on Long Island.

''We didn't think it would take that long'' to find a home, Ms. Greco said. Rather than have their daughter change schools twice, the Grecos ''made a conscious decision to rent'' on Long Island for four years.

They began searching the classifieds for rentals, preferring a single-family house to an apartment or town house. But house after house was a shabby wreck.

Then the couple saw an advertisement for a new house built by Campo Brothers Development Inc., a Long Island home builder, and they ended up renting a different property from the company in nearby Miller Place.

The 2,600-square-foot house has nine-foot vaulted ceilings, oak floors, an open eat-in kitchen, a family room with a fireplace, a formal dining room and a master bedroom on the second floor with a walk-in shower and Jacuzzi.

The Grecos pay $2,500 a month and treat the home as if it's their own. ''Nobody would think that this is a rented house,'' Ms. Greco said. ''All the appliances are top of the line. You couldn't ask for more, really.''

Rising home prices on Long Island and in other suburbs are creating new demand for rental homes and apartments. With median home prices at $490,000 in Nassau County and $400,000 in Suffolk County, as of the end of July, many families cannot afford to buy.

A family of four with an income of $106,000, or 120 percent of the median on Long Island, struggles to save for a down payment, said Peter Elkowitz, president of the Long Island Housing Partnership. If they decide to rent, the family has few options.

But a handful of builders around the Island have recognized the need for rentals and are building new homes with all the bells and whistles. ''They get rented out as soon as they become available,'' said Jack Campo, president of Campo Brothers, which has built 15 rental homes in the last three years and plans to build up to 35 more.

In addition, there may be tax reasons for a builder to lease instead of selling, especially the opportunity to defer paying capital gains taxes in cases where there are high profits.

The Campos have been buying land and building homes in the hamlets around Port Jefferson Station -- Miller Place, Mount Sinai, Middle Island -- for 40 years, Mr. Campo said.

He paid $25,000 apiece or even less for many of the properties about 10 or 15 years ago, when they were on undeveloped ''papered streets,'' which have been planned but not yet built, he said, then spent about $25,000 to improve the land, get town approvals and build roads.

Today, the land alone, Mr. Campo said, is worth $200,000 or more per lot. A house like the one the Grecos rent, would sell for $550,000, he said.

If he sold all of the homes he builds at such handsome profits, he would have to pay significant capital gains taxes, he said. By renting the homes, he can sell when it more favorable for his tax situation. And, in the meantime, the rents have paid off some or all of the mortgage.

''We look at it as an investment,'' Mr. Campo said.

Building new homes for rent is a niche market that can work for builders who have invested in land over time, said Robert Wieboldt, executive vice president of the Long Island Builders Institute, an association of more than 600 Long Island building industry companies.

''A lot of my builders are not finishing subdivisions because of the appreciation of land,'' Mr. Wieboldt said. ''A builder who has 20 lots will build 18 and save a couple.''

If the rent covers the mortgage and taxes, he added, renting new homes makes a lot of sense. ''You can also make deals with home buyers, renting out with an option to buy,'' he said.

But for the individual homeowner in western Suffolk, renting out a house may only lower monthly costs, not cover them.

For the first three days after Cameron Faisel placed an ad in a newspaper offering his Port Jefferson Station house for rent with an option to buy, he got about six calls a day. ''Maybe it's a good business to rent,'' Mr. Faisel said.

This was his first attempt trying to rent out the 30-year-old five-bedroom high ranch that he bought last year, planning then to move into it with his wife and 4-year-old daughter.

But his wife, who doesn't drive, wasn't ready to leave their home farther south in Selden, where there are relatives living nearby.

So Mr. Faisel renovated the kitchen and converted the half bath to a full bath. He set the rent at $2,500 a month, still $400 short of his monthly mortgage and tax payments, and he worries about finding the right tenant.

Mr. Campo, with 40 years experience in the Long Island building industry, has figured out how to even out his building costs and rental rates. ''You can't go more than $200,000 and make these work,'' Mr. Campo said of the costs to build new rental homes. ''If you go more than that, the mortgage and taxes are such that you have to rent for more than the market rate.''

Bryan Whalen, president of Whalen Builders, based in Hampton Bays, plans to hold on to some of his newly built Hampton Bays homes to have rental income during lean times. ''If the economy turns, we'll definitely rent them,'' Mr. Whalen said. ''If the economy stays strong, accountants say you might want to hold a few for rental, so you don't pay the capital gains tax on all of them in the same year.''

He said the rents would probably range from $2,400 to $2,600 a month for a new four-bedroom home.

Moving from building-and-selling to building-and-renting has been fairly simple, Mr. Campo said. Since his houses are new, they don't require much maintenance. His son, Michael, who oversees the rental homes, said he might have to visit one of the family's 15 rental homes once a month for small fixes like a leaky faucet.

''While I'm there, I'll take a look around,'' the younger Mr. Campo said, but for the most part, the tenants have been good caretakers. ''They're new houses, so people tend to take care of them.''

Mr. Greco feels as if he's in his own home rather than a rental. ''It's the fact that it's new,'' he said. ''I like that.''

He still mows the lawn as he did in his house in Port Jefferson. Ms. Greco still keeps a spotless kitchen and holds Christmas and Fourth of July parties, just as she did for many years in her own home.

''This is the way we live, no matter what,'' Ms. Greco said. ''I don't take care of this house for the Campos. I take care of it for us, because we live here.''

Photo: A 2,600-SQUARE-FOOT RENTAL -- Jeanette and James Greco pay rent of $2,500 a month in Miller Place. (Photo by Kirk Condyles for The New York Times)